June 11 (Bloomberg) -- The Senate voted to give U.S. drug regulators power to restrict tobacco products, bringing a decade-old fight over supervising the $80-billion-a-year industry near an end.

The 79-17 vote followed House approval of a similar measure April 2. Speaker Nancy Pelosi said the House may accept the changes made by the Senate and send the legislation “right on” to President Barack Obama for his signature. Obama, who publicly swore off smoking last year, backed regulation as a senator.

The measures empower the Food and Drug Administration to restrict ingredients such as tar and nicotine, limit advertising to young people and approve the sale of new products. Tobacco- state lawmakers killed a similar attempt in 1998 and a half dozen times since then. This year regulation has the support of the Democratic majority in Congress, public-health groups and Altria Group Inc., the biggest U.S. cigarette maker with brands such as Marlboro and Benson & Hedges.

“Joe Camel will be given a life sentence and put away forever,” said Richard Durbin of Illinois, the chamber’s No. 2 Democrat, on the Senate floor today, in a dig at the cartoon image used by Reynolds American Inc. to advertise cigarettes. “We’re going to give our kids and families across America a chance for a better life.”

443,000 Deaths

Cigarette smoking is the leading preventable cause of death in the U.S., killing about 443,000 people a year, including 49,000 from secondhand exposure, according to the Centers for Disease Control and Prevention, a U.S. health agency in Atlanta. Smoking increases the risk of several cancers, heart disease, stroke, chronic obstructive lung disease and infertility. A 1964 Surgeon General’s report was the first official recognition in the U.S. that tobacco is dangerous.

Regulation would be funded through escalating fees paid by companies. Both the House and Senate measures would prohibit the FDA from banning any form of tobacco or reducing nicotine limits to zero.

“From what I have seen so far I believe it will be possible to accept their bill and sent it right on to the president,” Pelosi, a California Democrat, told reporters today. The House is scheduled to vote on the measure tomorrow.

Altria fell 22 cents, or 1.3 percent, to $16.85 at 4:15 p.m. in New York Stock Exchange composite trading. The shares traded ex-dividend today, meaning buyers today aren’t be entitled to receive the 32-cent quarterly dividend payable on July 10. On that basis, excluding the dividend, Altria shares rose 10 cents. Reynolds added 5 cents to $37.35. Lorillard increased 70 cents, or 1.1 percent, to $66.57.

Targeting Tobacco

Democrats have targeted tobacco in their efforts to rein in record health-care spending. Congress raised federal cigarette taxes from 39 cents a pack to $1.01 cents a pack earlier this year, over Republican objections, to pay for an expanded health- insurance program for children. Social acceptance of tobacco is also waning, as shown by recent bans on smoking in restaurants and public areas in many states and cities.

“Each year, Americans pay nearly $100 billion in added health care costs due to smoking,” Obama said today in an e- mailed statement. “I look forward to signing this bill into law, and to working with” health officials to implement it.

Altria’s Support

Altria’s Philip Morris USA unit has supported regulation for more than eight years as a way to standardize requirements for domestic and foreign manufacturers, encourage the development of less-harmful tobacco products and provide scientific and transparent information to consumers, according to its Web site. The Richmond, Virginia-based company makes half the cigarettes sold in the U.S., led by Marlboro.

Smaller manufacturers Reynolds and Lorillard Inc. oppose FDA regulation, saying restrictions would perpetuate Philip Morris’s dominance and discourage novel products that may be less harmful.

In the past two years, Reynolds has broadened the use of the Camel brand name from cigarettes to include small pouches of tobacco called “snus” and dissolvable tablets containing nicotine. The legislation doesn’t adequately consider the popularity of smokeless tobacco, and proposed restrictions would limit the ability of companies to communicate the relative risks of various tobacco products, said Maura Payne, a spokeswoman for Reynolds.

“The bill doesn’t reflect where science is today,” Payne said June 8 in a phone interview.

‘Best Positioned’

Winston-Salem, North Carolina-based Reynolds had a 28 percent share of the U.S. market last year, according to its annual report. Lorillard, of Greensboro, North Carolina, makes the leading menthol-flavored cigarette Newport and is third in total U.S. sales.

Altria is “best positioned for FDA regulation, as the FDA bill places significant restraints on advertising, limiting competition between manufacturers for market share and hence making it easier for Altria to maintain its nearly 51 percent cigarette share,” said Erik Bloomquist, a JPMorgan Chase & Co. analyst in London, in a May 21 note to clients.

Reynolds may be “most negatively affected” because its new smokeless products would face high hurdles over claims that they are less harmful, Bloomquist said. He has an “overweight” rating on Altria shares and “underweight” on Reynolds.

The legislation would overburden the FDA and jeopardize its credibility by forcing it to regulate products that are inherently dangerous to human health, said Senator Richard Burr, a North Carolina Republican. He and Senator Kay Hagan, a Democrat from North Carolina, proposed creating a new tobacco- oversight agency within the U.S. Health and Human Services Department. Reynolds supported that measure.

Menthol Allowance

The Supreme Court ruled in 2000 that the FDA can’t regulate tobacco unless Congress gives it authority to do so, and the House and Senate never agreed on a proposal until now.

The new legislation offers a concession on menthol, the most popular flavored cigarette and one used by 80 percent of black smokers, according to the 2005-2006 National Surveys on Drug Use and Health. While other flavors including cloves and strawberry would be banned from the market, menthol would remain unless the FDA later determined it to be a health risk.

Seven former U.S. health secretaries said in a letter to lawmakers last year that the menthol allowance discriminates against blacks in favor of protecting the financial interest of tobacco companies.

U.S. spending on tobacco products totaled $80 billion in 2008, up from $79 billion a year earlier, Michael Szymanczyk, Altria’s chief executive officer, said Feb. 18 at the Consumer Analyst Group of New York annual meeting in Boca Raton, Florida.

To contact the reporter on this story: Catherine Larkin in Washington at clarkin4@bloomberg.net.

Last Updated: June 11, 2009 18:38 EDT